Eurozone markets' key inflation gauge shot up on Friday, a sign investors believe ECB bond-buying will succeed in driving up consumer prices, while the gap between US and German borrowing costs reached its widest since 1989. The five-year, five-year forward breakeven rate , the European Central Bank's preferred measure of the market's long-term inflation expectations, was set for its biggest weekly rise in at least 2-1/2 years.
-- Portugal, Spain, Italy, Ireland yields hit new lows
The ECB's programme of bond purchases with new money, aimed at igniting inflation and growth, starts on Monday. Along with revealing details of the scheme, the ECB forecast on Thursday consumer price growth would rise from zero this year to 1.8 percent in 2017, close to its target of just below 2 percent. The rise in inflation expectations reflects recent more positive euro zone economic data, a rebound in oil prices and the weakening euro, which will make imports more expensive.
The five-year forward, which shows where investors expect 2025 price growth forecasts to be in 2020, rose as high as 1.798 percent from 1.765 percent on Thursday. It has climbed around 0.15 percent this week - the biggest rise since Reuters started tracking the measure in late 2012. Euro zone government bond yields fell broadly for a second day though core yields later stabilised after stronger-than-expected US jobs data. The gap between 10-year German and US bond yields rose to 1.85 percent after the US data, its widest level since May 1989, according to Thomson Reuters' Datastream. US nonfarm payrolls rose 295,000 last month after an increase of 239.000 in January, hardening views that the Federal Reserve will consider hiking rates in June, driving the US 10-yaer yield 13 bps higher to 2.24 percent. The Fed's next policy meeting is on March 17-18.
Comments
Comments are closed.